This column was originally published on RealMoney on Nov. 16 at 11:09 a.m. EST. It's being republished as a bonus for TheStreet.com readers.
New York Mercantile Exchange
will begin trading Friday under the symbol NMX, and based on the early consensus, shares are expected to soar. On Tuesday, underwriters raised the size of the offering by 500,000 shares to 6.5 million and also raised the price range to $54-$57 from $48-$52.
Last night, I spoke to several friends who work on the NYMEX and all told me to buy the stock. (I can't because of my restrictions, but that didn't stop them.) On
Wednesday, one of the "Fast Money" roundtable participants said that no matter what, you have to own NYMEX. Even one of my Internet searches for "NYMEX IPO" turned up "NYMEX -- The Holy Grail of IPOs."
The hype is warranted. Only 6.5 million shares will hit the market. Compare that with the 88 million shares scheduled to float for Hertz and 28 million shares scheduled to float for KBR, two other extremely popular IPOs making headlines this week.
And could you find a better time for NYMEX to hit the market? The industry is in full consolidation mode, and shares for almost all publicly traded exchanges have soared, including
International Securities Exchange
. Share prices for each are up 150% and 220%, respectively, since their IPOs back in 2005.
Demand for the NYMEX IPO is so high that I couldn't find one negative comment about it in any of my searches. That wasn't the case with other sought-after IPOs, including
. When Crocs opened trading, many questioned the valuation behind the offering. MasterCard's offering was surrounded by issues of a weakened economy that could lead to slower consumer spending. Less than seven months later, both are up more than 125% from their IPO prices.
Prudential Equity Group is one of the few firms to provide a research note on NYMEX pre-IPO. Pru says major public exchanges trade between 23 times and 36 times 2007 projected EPS estimates. I confirmed the research with Capital IQ, and also found that the average trailing 12-months estimate for major public exchanges is 42. If NYMEX prices at the midpoint of its range, it would trade at 27 times estimates, or 35% lower than the average.
I believe there's a very strong chance that shares will trade well ahead of the midpoint of the range.
Because of the limited float and huge demand for the offering, Prudential refused to place a price target on NYMEX. But I'll go out on a limb and suggest (or guess) that shares could trade in excess of $85 Friday. I'm interested in hearing your targets (and guesses).
In keeping with TSC's editorial policy, Frank Curzio doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.
Frank X. Curzio is a research associate at TheStreet.com, where he works closely with Jim Cramer and and writes
. Previously, he was the editor of The FXC Newsletter and senior research analyst for Greentree Financial, and passed his Series 7, 63 and 65. He appreciates your feedback;
to send him an email.